| This paper explores the relation between energy as an input of production and firm-level productivity for Chile, Colombia, Mexico and Peru, all country members of the Pacific Alliance economic bloc. The empirical literature, has explored the impact of infrastructure on productivity; however there is limited analysis on the impact of particular infrastructure variables, such as energy, on productivity at the firm level in Latin America. Therefore, this study conducts a quantitative assessment of the responsiveness of productivity to energy cost and quality for Chile, Colombia, Mexico and Peru. For this, the empirical strategy is to estimate a Cobb-Douglas production function using the World Bank's Enterprise Survey to obtain comparable measures of output and inputs of production. This approach provides estimates of input factor elasticities for all of the factors of production including energy. The results indicate that electric energy costs explain cross-country differences in firm level productivity. For the particular case of Colombia, the country exhibits the lowest capital and labor productivity of the PA, and firm output is highly responsive to changes in energy use. As a result, the evidence suggests that policies reducing electric energy costs are an efficient alternative to increase firm performance, particularly in the case of Colombia. |
